Free AFP-CTP Exam Dumps Preview

The term "factoring" refers to a:

Company M operates a grocery distribution business on Main Street. As part of its business continuity plan, Company M intends to purchase insurance to cover the facility lease for its Main Street warehouse in the event it cannot operate for a period of time.

What type of coverage should Company M purchase?

A convenience store chain would typically use which of the following types of collection systems?

During a company's cash flow analysis review it discovers that for every 10 new customers it gains, there is an increase of 2% in its float costs associated with the payment methods it offers.
If the company pursues faster collection methods for payments, resulting in greater availability of surplus cash with a correlating decrease in the need to issue commercial paper, what risk will the company mitigate?

XYZ Company is considering different methods of concentrating cash from its subsidiary accounts to its main operating account. It uses short-term borrowings with a rate of 7% to fund daily operations, and the reserve adjusted earnings credit rate on its subsidiary accounts is 1%. A review of its bank fees shows that wires (same day transfer) cost the XYZ Co. $7.00 each while ACH debits (next day transfer) cost $1.25 each.
If the primary objective is to minimize costs, what must the transfer amount be (rounded to the nearest whole $) to justify the use of a wire transfer instead of an ACH to concentrate the funds?

A review of a company's risk management strategy would include all of the following EXCEPT:

Banks offer image exchange as a means to accelerate deposits for their customers.
If a customer seeks to take advantage of this service, what should the customer implement?

A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?

To strengthen outside auditor independence with regard to publicly held companies, the Sarbanes-Oxley
Act requires that:

XYZ Company has one inventory supplier, and title to inventory is transferred to the company during the manufacturing process.

Which of the following BEST describes XYZ's relationship with its supplier?

T-bill discount rate = 5.85%

T-bill face value = $100,000

Initial term = 90 days

What is the bond equivalent yield on this T-bill?

XYZ Company has decided to transition the responsibility for its hedging activities from the local offices to
the head office; however, the local offices will continue to choose their own depository banks. Under the

new structure, XYZ's treasury operations will be:

Underfunded pension obligations can be reduced by:

On the basis of the data above,

what is the forecast for Thursday's cash receipts, under the exponential smoothing method?

Compared to a letter of credit, a documentary collection is:

A company's basic investment objectives should include all of the following EXCEPT:

Which of the following is true when a company purchases goods using trade credit from suppliers?

The seller's cost of capital is 12%. The average credit sale is $200,000, and the credit terms are 2/10, net
30.

What is the seller's net benefit (loss) if the buyer takes the discount and pays by day 10?

A U.S. company is selling product for US$10,000 to a Canadian company with payment in Canadian dollars. The exchange rate has been booked at C$1.45/US $1 for payment upondelivery in 15 days. The Canadian dollar is forecasted to weaken within this period.
This is an example ofA.

A sinking fund is primarily used for which of the following purposes?

A company plans to perform an A/R cash analysis based on the following sales information:

60% of sales are collected within two months after the sale. After three months, $135,000 of January's sales has been collected.

What was the percentage of January's sales collected in April?

A large U.S. company is planning to fund its Canadian subsidiary. Currently, the Canadian dollar is trading at CAD 1.25 per U.S. dollar, and the U.S. dollar is expected to depreciate in the near term.
To manage this FX exposure, what technique should the company implement?

An airline wants to lock in the price of the jet fuel it needs to purchase to satisfy the peak in-season demand for travel. The airline wants to manage its exposure to fluctuations in fuel prices.

What type of exposure is this?

Without regard to costs, which of the following concentration mechanisms maximizes investment income in a multi-bank environment?

Company XYZ is now required to make electronic payments by its suppliers. To prevent an increase in costs, the company shoulD.

XYZ Company has decided to purchase a close competitor. This acquisition would make XYZ Company the 4th largest in its industry allowing it better purchasing power and greater distribution channels. After completing the M&A analysis, it is determined that the combined companies would produce a 40% increase in revenue, reduce manufacturing costs by 30%, but would increase current liabilities by 27%.

Which of the following would keep the acquisition from happening?

In comparing the U.S.
banking system and foreign banking systems, which of the following statements is true?

Assume the cost of an ACH transaction is $0.80, the charges for a wire transfer are $30.00, the monthly account maintenance fee is $10.00, and the company earns interest at an annual rate of 1.825% on overnight investments.

What is the break-even point where the interest earned on overnight investments offsets the incremental wire costs?

The accounting requirement that a product's selling costs be recorded in the same period as the product's revenue is recorded, regardless of when the cash is paid, is an example of the:

When a company must determine the optimal mix of long-term borrowings versus common equity, it is making which of the following types of corporate financial decisions?

The role of the depository bank in the check-clearing process is typically which of the following?

A U.S. firm acquires a large U.K. manufacturer that generates high levels of cash flow in its local currency.
The purchase is denominated in British pounds and is financed through the issuance of 10-year, 7.5% U.S. dollar bonds. The U.S. firm will rely entirely on the U.K. manufacturer's cash flows to fund the interest payments on the bonds. What derivative instrument would help the U.S.
firm manage its FX exposure?

A utility company is evaluating whether or not it should build a new plant.
The process of reviewing the quantitative and qualitative factors are an example of which finance function?

A large U.S. based multinational corporation favors use of intra-company loans to repatriate funds from its foreign subsidiaries in order to take advantage of the favorable tax treatment of loans. In those countries which restrict repayment of intra-company loans the corporation may need to:

An analyst for a landscaping company wants to adjust her cash-flow forecast to account for the seasonality of outflows.

How can this be accomplished?

Company XYZ uses exponential smoothing to forecast its daily lockbox receipts. With the help of a statistical computer program, the company has determined that the smoothing constant is 0.35.

Using the data in the table, what is the exponential smoothing forecast for Day 7 (rounded to the nearest whole $)?

Company XYZ is a high technology company. It is planning on acquiring another company in the high technology sector. Company XYZ does not have enough cash to acquire the company and is planning on financing the acquisition through a bond offering.

Which of the following measures is company XYZ MOST LIKELY to use in its analysis of operating profits considering it is a high debt transaction?

Which of the following are basic security issues to be considered in evaluating a treasury management system?

I. Data recovery

II. Anti-virus protection

III. Database access controls

IV. Data integration

With the advent of the euro, many U.S. companies have seen a reduction in their number of foreign currency transactions. As a result, these U.S.
companies have benefited from which of the following?

I. Reduced FX transaction costs

II. Consolidated banking relationships

III. Simplified exchange risk management

IV. Reduced need to monitor foreign political climates

Which of the following will exempt commercial paper from SEC registration?

I. A maturity of fewer than 270 days

II. A rating grade of A-1 or P-1

III. Distribution through a licensed dealer

IV. Backing by a U.S. bank letter of credit

LLZ Company manufacturers metal detectors in California at a cost of $9 per unit. The most expensive component to make is the sensor which goes in the finished product. The cost is $5 per sensor. Last month LLZ acquired a company in Mexico that makes the sensors for $1 per sensor. LLZ plans to move all sensor manufacturing operations to the factory in Mexico.

What is the movement of this cost saving process called?

To monitor financial institution service quality, a company would use all of the following measures EXCEPT:

Check MICR line information includes which of the following?

I.Bank of deposit identification number

II.Payee bank identification number

III.Federal Reserve bank code

IV.Payor's account number

Account analysis statements should be examined for which of the following reasons?

I. To verify volumes processed

II. To determine daily cash shortages

III. To verify the accuracy of bank service charges

IV. To ensure that company-initiated transactions have occurred

Company ABC has a concentrated investor base consisting primarily of large institutional shareholders. It would like to increase its number of smaller shareholders using the most cost effective method of raising capital available.

What should Company ABC do to accomplish this goal?

When a short-term loan is paid with a lump sum payment and the payment includes both interest and principal, the loan is often referred to as a:

A company's credit agreements or loan covenants may require:

On which exchange is a company's stock traded on the over-the-counter market?

Convertible securities consist of preferred stock anD.

A properly designed concentration system will potentially achieve which of the following results?

I. Increased authority to field offices

II. Increased investment income

III. Improved ability to take discounts

IV. Reduced dependence on third-party concentration vendors

Which of the following are interest-bearing instruments?

I. Certificates of deposit

II. Treasury bills

III. Treasury notes

IV. Banker's acceptances

Which of the following payment types is at the greatest risk for fraud?

The year-end income statement for a company is presented in Table 1. The balance sheet is presented in Table 2.

What is the company's return on equity?

In a large company, the financial planning function typically falls directly under the responsibility of the:

An analyst at XYZ Company was assigned with determining if the company should start to use a lockbox provider for its retail payments. The analyst determined that the company's annual sales of $324,000,000 were recorded evenly throughout the year. The Company receives 30,000 checks annually. Total dollar-
days float without the lockbox is $76,500,000 and the annual opportunity cost is 5.5%; assume 30-day month. The industry's average opportunity cost is 6.0%.
Using the information in the table,what would be the net effect of using the lockbox?

Fluctuations in interest rates and the availability of funds are more significant risks for companies that rely on:

Which of the following is an example of off-balance-sheet financing?

Contingency plans often focus on the business supply chain, ensuring that customer service is maintained.
The financial supply chain, which is equally critical to the plan, should address:

Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?

Which cost benefit analysis technique uses the methodology to find where the present value of each project's cash inflows equals the present value of each project's outflows?

XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments.

What type of bond should XYZ Company issue?

A company has asked its marketing, payroll and sales teams to collaborate in finding a solution that could augment its customer base, reduce payroll cost and increase sales. The solution has to be market ready.

Which of the following will serve all 3 purposes?

Which of the following is NOT a consideration for treasury managers when implementing electronic communications with FSPs?

DGB Inc.'s CEO and founder retired shortly after the company went public two years ago. DGB Inc. has recently struggled, and the founder has agreed to return as an independent director.

What violation, if any, has occurred?

A multinational company that uses "notional pooling" for its euro zone subsidiaries will realize which of the following advantages?

Net working capital is defined as:

Company RST is a seasonal retailer who has just completed its holiday season and is temporarily flush with cash. The treasurer has identified approximately $15 million of excess balances and is trying to determine what to do with the surplus cash. Cash forecasts show that the funds will be needed in approximately 30 days to replenish inventory.

Which of the following plans should the treasurer implement immediately?

Which of the following is generally NOT a benefit of financial risk management?

CT Check Cashing routinely cashes payroll checks from JD Software. Someone presents a fraudulent check from JD Software to CT Check Cashing. The fraudulent item looks virtually identical to JD
Software's regular payroll checks. CT Check Cashing pays the person cashing the check the amount for which it is issued. CT Check Cashing later discovers that the check was fraudulent and wants JD Software to reimburse them for the amount of the check.

Which of the following statements is correct?

Which of the following is an advantage of a centralized treasury function?

Which of the following are commonly used for financing accounts receivable?

I. Factoring

II. Issuing credit cards

III. Revolving bank loans

IV. Letters of credit

XYZ Company is a fairly new and high growth company funded by venture capital.

Which of the following performance measures is it MOST LIKELY to use?

What type of tax does a multinational auto manufacturer commonly pay in foreign countries at each stage of a vehicle's production?

XYZ Company has incurred a financially devastating event because of a hurricane at its offshore manufacturing plant. Due to the impact on liquidity, the company may not be able to survive.

What should the Treasurer have done in order to assess the risk associated with this type of event?

A multinational corporation has a successful subsidiary in a country that taxes cross-border dividend payments at 72%. Collections on accounts receivable average 90% per month, and the average rate on local government bond investments is 2.5%.

What would be the BEST method for the company to repatriate local profits?

On June 1, a manufacturing company experienced a system failure that lasted more than 24 hours. The company did not have any contingency plans in place and as a result the cash manager was unable to process the following payments: $25,000 to the p-card issuer, $125,000 for weekly payroll, $500,000 for a bond interest payment, $260,000 for the weekly vendor payments and $50,000 for the monthly utilities.
The receivables were deposited at the bank; however, the cash manager does not have a way to confirm the amounts. The suppliers are threatening to stop shipments due to the delay in payment and the loss of supplier shipments threatens the company's just-in-time production.

What did the manufacturing company trigger as a result of the system failure?

Which of the following is a component of a company's operating budget?

The executive management of a utility company would like to determine if it would be more cost effective to hire a third-party provider to handle its bill processing functions, which are currently internally operated.

What formal selection method should the company use to obtain proposed solutions and detailed pricing from potential vendors?

An option can be exercised in the market at its:

A United States corporation purchases finished products from a German subsidiary and sells raw materials to the subsidiary several times in one month. To minimize foreign exchange transaction costs, the U.S. corporation's cash manager would MOST LIKELY use:

Improvements to the cash flow timeline from a selling company's perspective would include:

Which of the following is responsible for liquidating the assets of failed financial institutions?

A trader of ABC Bank executed and audited his own trades.
Assigning these two functions to the same person introduced which one of the following risks to the bank?

All of the following statements are true about adjustable-rate preferred stocks EXCEPT:

All of the following are discounted instruments EXCEPT:

When a company announces a significant and unexpected dividend increase, it signals to the market that management expects:

A company's overall cost of capital depends on the:

All of the following are basic considerations for balance compensation by a company EXCEPT:

A cash manager is responsible for a small subsidiary that has significant funds but only writes one check per month.

Which of the following types of accounts would the cash manager use for this subsidiary?

As a result of an employee's intentional actions, an electronic payment to a supplier was misdirected to an unauthorized account.
This is an example of which of the following types of risk?

A portfolio manager purchases a floating rate mortgage backed security that would currently provide a 4% yield to the company. Since mortgage rates have been fluctuating significantly over the past month, the manager is thinking about entering into an interest rate swap to hedge against the rate movements.
Although the manager would remove most of the price sensitivity of the asset by executing the swap, it would also lower the total yield on the investment due to swapcosts.

What objective in the company investment policy is guiding the portfolio manager's decision?

Why would a company establish a short-term credit facility?

A French company conducts business strictly within the euro zone (the EMU).

Which type of risk is of LEAST concern?

Which of the following is a true statement about operating leverage?

Which of the following will directly increase a company's cost in a fee-only bank relationship?

A large multinational company with multiple autonomous operational entities is MOST LIKELY to operate.

A bank employee programs an internal payment system to transfer half a cent of each transaction to her personal bank account.

What type of risk does this behavior illustrate?

A company that is considering using a central lockbox for collections has conducted an initial study and determined the following:

What will be the annual net dollar benefit to the company if it uses a lockbox?

Which currency will sell at the greatest discount in the forward market against the U.S.dollar?

A company has a $300,000 credit line of which $200,000 was the average amount outstanding for the year. The terms of the loan include a 1/2 of 1% commitment fee on the unused portion, an interest rate of 10%, and a compensating balance requirement of 2% of the total credit line. The company's compensating balances are funded from credit-line borrowings.

What is the effective annual interest rate on the net usable funds?